The guests were Jefferies & Co.’s Peter Misek, a bull on the stock, and Stuart Jeffrey of Nomura Equity Research, a bear.

Misek: It’s not about the handsets. They don’t make any money on their existing handsets. The Z10, frankly, if get 5% global market share, would be a home run. Frankly, that’s what we were expecting in the U.S. And the service revenues. 30 million of the subscribers are corporate. They now handle iPhones, they handle other devices, including Android, and BlackBerrys, on one server. Let’s say they generate $100 per year, on an annual subscription basis, and we’re not just talking about services revenue, we’re talking about software. And you’ve got $5 billion at a 40% operating profit, or almost $4 earnings per share in three to five years. That’s the key to our thesis, that’s the business, and that’s the future of BlackBerry.

Jeffrey: Well, I think that math has been used a lot in the past year. And we’ve looked at sum-of-the-parts type of the valuation for RIM. And what we saw was BlackBerry’s willingness to sell their devices below cost, and have negative gross margins. And so, looking that as a standalone entity is an interesting way of looking at things. But they’ve still got to sell devices to make sure that people continue to use those BlackBerry devices. And if they don’t, then the enterprise will transition to Android, or to iPhones, and the consumer will transition as well.

Misek: We can transition now. They support that, no problem, now. They do what Good Technologies, AirWatch and others do, but they do it better, cheaper, and faster, and frankly they could exit the handset business.They could sell it to a Huawei, to a ZTE, to a Lenovo, and suddenly that negative gross margin disappears, and you have profit. I don’t think the Street’s looking at that. And, frankly, last year we had a Sell on the stock, we upgraded it at $10, and we think it’s now a great buy. We think it’s a great cash flow story that’s already been discounted. And the Z10, frankly, the launch here in the United States, was mediocre as we expected, and internationally is was great. There’s a billion smartphones sold every year, approximately, that’s what’s going to happen this year. Asia’s more than half. Frankly, the key for BlackBerry going forward is to continue to dominate in europe and asia in that middle market, and, frankly, in the business market. Again, with 30 million subscribers, that’s really all that matters. Verizon [Communications (VZ)] has around 10 million enterprise subs, AT&T, around 10 million. Those folks’ BlackBerrys are around 3 years old. They’re going to upgrade, some percentage are going to upgrade. So we don’t think Z10 has to be a success.

Jeffrey: If you focus just purely on the enterprise market, the Q10 has an opportunity to have a bit of a refresh cycle. I think that’s what’s driven the stock in the last few months, and why it’s up so much, is that people are looking for the new product to drive some replacement in the enterprise market, and people have held onto their devices for a long time. But the fact of the matter is, if you’re just hosting a Good, or some other type of service, you’re getting probably a quarter of the revenue of hosting a full BlackBerry service. So that undermines the the service revenue argument. The consumer side is going to be falling by a good billion over the next few years as well. And if you look at the smartphone business models, only the Apple (AAPL) approach, of really controlling services and content, and having a good integrated solutions works, and BlackBerry hasn’t been doing that, or you need to control the device with the best components and the best scale, and Samsung’s done that and no one else has managed that. I think the problem with looking purely at the enterprise side misses the fact that people have to have two devices if you take that view, or you need to have confidence that people will be happy to have a BlackBerry rather and another device.

Misek: Let’s make the argument simple. If I described a company that had 50 million subscribers, at $100 a year, which is, by the way, lower than what they make now, with 40% operating margins, what would you pay for that? You’d probably pay a lot. So, if we see the IPO of AirWatch, or Good, who are going to be valued probably in the multiple billions of dollars, at a fraction of the subs, at a fraction of the revenue, we would argue that that’s the opportunity. We totally agree: The Z10, all these handsets, RIM can’t compete. That’s why we think a Chinese tie-up is really the way to go. And we think earnings are going to be positive in May. That’s the key.

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There are 23 comments

MARCH 25, 2013 10:37 P.M.

ArZa wrote:

Sheeeshhh . . Both have it wrong. I like Misek except that bbry can and should compete in the high end handset segment. License the lower segment out to chinese manufacturers.

MARCH 25, 2013 11:02 P.M.

Dan wrote:

I don't really understand today's analysts now. they are all junks, just in the case of bbry, the bears are more junky than the bulls, and that's all.

It all comes to cost and sale. Blackberry has cleaned its house and I believe it should continue with that. It has to become lean enough and streamlined enough while having sales, either handsets or software or service as much as possible.

It will do okay, and we will see soon!

MARCH 25, 2013 11:08 P.M.

goBBRYgo wrote:

It's a good debate. I guess only time will tell who's correct.

MARCH 25, 2013 11:12 P.M.

Dave wrote:

Both are useless and Misek is even more. He is just a pawn to vested interest - help shorties or bull hedge funds. There is no analysis but manipulation.

MARCH 25, 2013 11:17 P.M.

satv wrote:

Both of them are playing with the stock by hitting the phone because they are Americans.They are playing it because the sales numbers are muted and did not strike out.I think all companies should have radar meters that show unit counts on every fresh click every second otherwise these retards will continue to be greedy by spinning the head round.

MARCH 26, 2013 12:32 A.M.

VC wrote:

Z10 can definitely compete with iPhone and blow away the plastic samsung. T service eveu are just icing n the cake. BBRY more phones coming and they are into mobile computin, not just phone. These analysts know that. it is just that they cannot build it in their model. BBRY will be higer in the future.

MARCH 26, 2013 1:58 A.M.

sj wrote:

Android is coming too strong. Samsung and other players have made Android better with so much apps to choose, it will be very difficult for BBRY and Windows phone to compete right now with a little apps.

MARCH 26, 2013 3:35 A.M.

Allan wrote:

I don't see a business person or any one professional using anything but a BlackBerry, if they have the option. Now they do, with the Z10 and the upcoming Q10. I used the Z10 in the AT&T store and was impressed with how nicely built it is, the size was perfect to hold and text with one hand, the function & flow was very intuitive and the virtual keyboard WOW!!! I have never used BBY before. I've used Swype on Android and liked it. I hate the iOS typing torture system, just idiotic. But I was flicking away at over 40 wpm on the BBY. Absolutely mind blowing good!

MARCH 26, 2013 3:36 A.M.

Mark Katzman. wrote:

Nomura's analyst has a 46% accuracy on ratings sine 2009 while Jeffereies analyst (Peter Misek) has a 60%. however goldman Sachs also reduced the stock to Hold (Simona Jawonski) and she has the best statistics amond those covering blackbery. see how good is any analyst covering any stock before you decide to follow their advice, i recommend using TipRanks but their might be others.. http://tipranks.com

MARCH 26, 2013 4:30 A.M.

Anonymous wrote:

You think bb will or might get out of the device market? I dunno. That option is hard to believe. I know much of the BB's design etc is done in Deutschland. Ya. Dats fur shoor. Where's it being manufactured? Anyway. It gives you something to think about when the bull of bulls Misek says the device side of the company doesn't matter to the business or something like that. No devices and bb will vanish because it'll no longer have visibility. Regionally and countryside that 's their feather of feathers chief. BB cannot sell services like IBM. IMHO. Or else BB would be called big mobile like big iron. Ha. BB's market is shrinking in all contexts and iOS and Android continue improving and taking mind and market share. The current atmosphere kind of reminds you of the days when American Motors was around and trying to sell the Rambler. Or was it the Pacer or the Gremlin. Whatever. They were distinguished as oddities. Entities with foggy souls and questionable spirits in terms of ability to live on in the market and why ever would that he. Why. And so that eternal existential question revisits the BB and its maker. Will this just not be the end of another religion I mean story in tech? It's about how many still believe versus how many no longer believe. Converts? Hmm. Seriously. Charity is not very good for earnings et cetera.

One thing can be said. BB's subscribers enable the company to differentiate itself from Palm when it was on its last legs. Otherwise. Both stocks are looking similar.

Looking down. Spiral wise. And where it gets darker too. Is there a definitive thing or moment that'll symbolize the tipping point? Losses. Sub no.s.? Asp? BB has already abandoned Japan as a market. Where's next?

The subtle power of reluctancies. What a concept. Know what I mean. Hard to keep up and be relevant when the digital community drags its feet or becomes more elite and exclusive. Witness the apps and developers not supporting BB. Is it enough to have a decent os, web capable, hw competent, and not losing subs? Growth at what cost and to be competitive.

MARCH 26, 2013 4:49 A.M.

Anonymous wrote:

I think since BB has never escaped the odious distinction as being your employer's enterprise mobile device and dog collar. Resistance will prevail. Call it a cultural milieu. Frank's job was to deal with that and give the image a fix. No. That's point one. The BB turns employees into punks. Yeah. Point two. Woof woof. The BB is very close to home however it's only listed on the Nasdaq home market. Therefore. You have a fabulous whipping boy that generally only your employer in enterprise or government is likely to insist you have with you 24/7. Will BB's new iOS-Android enabled server pick up the slack? Why don't Google-Apple-Microsoft make their own encrypted server solution? Maybe that's not such a good idea. It sounds unprofitable and altruistic like socialism...

By the way. On earnings. When a company like BB is not getting the revenue and profits from where your expecting but the earnings report has a lot of mystery gaps: Where are they pulling funds to maintan $2.9 b cash no debt but losses prevail? What are they doing?

MARCH 26, 2013 5:29 A.M.

Anonymous wrote:

"Misek: It's not about the handsets." Oh yes it is. Blackberry w/o a handset is like uninteresting. Suddenly a dividend stock at best. Boring. W/o devices the company must redefine itself and consider licensing. Yet the rest of the market will advance and erode any advantages BB has. Goldman Sach's has retreated from giving BB a 30% chance to now 20. Maybe after the Verizon release BB will be boosted to 25%. LOL.

MARCH 26, 2013 6:45 A.M.

Mikey wrote:

What a waste of airtime. Why argue? Each is entitled to their own opinion and that is exactly what it is - an opinion.

MARCH 26, 2013 7:48 A.M.

al wrote:

Z10 is the best device for corporate use, especially since there's no way to easily transfer data from the previous models, out with the old!

MARCH 26, 2013 8:47 A.M.

mike wrote:

i think Miesk is right on this one, the future for BB is software, hardware is a game for aisan countries.

MARCH 26, 2013 9:30 A.M.

Wet Paint wrote:

Misek runs circles around him and Misek is out to lunch on how good the Z10 is. Very bullish indeed.

MARCH 26, 2013 9:34 A.M.

rtmunro wrote:

this is just verification that no matter what you say the "fans" are going to find a reason to get the pitchforks out. I'm decidedly skeptical about BBRY's ability to execute anything. From my perspective they are bordering on incompetent. However, I thought Misek actually made the first argument that makes sense and gave me a real reason to think they may not go to zero in a year. I'm surprised at the longs bashing him. He makes a good and reasonable case. I thought you'd be thrilled to finally hear someone backing you up.

MARCH 26, 2013 12:33 P.M.

mp65 wrote:

What all these analyst are missing is this...
2007 the smartphone market was 150M, enter Apple and the touchscreen. Very poor sales 2007, 2008, 2009...The smartphone market grew but BB also grew it's subscriber base having an inferior product...jump to 2012 and the Smartphone market is close to a Billion phones...Apple continued to gain most in the 850M increased market space (selling phones)...Samsung gained in this space as well...BB was never in the everyday user market but still managed to grow from 45M subscribers to 80M in that time frame...The market is now grown into it's size of 1 billion phones but that took 5 years to happen. Now the market is about replacement phones in the 1 billion phone space. BB now has a phone to compete and some would argue dominate in this space however it will not take as long to gain Market share as it did for Apple or Samsung because the market is now established at a billion smartphones...no one is going to use a cell phone anymore...

The reviews of BB10 phones (and they only released one phone of 7 so far) are extraordinarily positive (go on amazon and best buy and check for yourself)...The user experience is superior to Apple and Android...word of mouth when friends and relatives show others will sell the phone into that space (850 M Market BB was never in)...This phone will sell, it is a better user experience period! The difference this time is that the change won't happen over 4 years it will happen in one! BB will have a minimum 10 percent Global Market Share and could go as high as 30 but even with ten they are in the 8 - 12 billion in profits range and at 10 to 1 price to earnings ratio the value of the stock would be 150.00 to 225.00 a share...If you don't see the potential of a company that has a worldwide brand name, leading in security, the best Operating system 3 Billion in cash and growing, 80M subscribers and growing, and has managed to do this with an inferior product for 5 years and now has a superior one then I really don't know what to say other than WOW! Remember if they do catch on which I believe they already have and will continue to take portions of MS away from Apple and Samsung and actually get 20 percent MS the stock would be worth 300.00 to 500.00 if they manage to get back 30 percent then they are 500.00 to 1000.00 a share.

The market is huge and word of mouth is a big big player. Word of mouth about BB10 is 90 percent Positive from users and all the analysts in the world can't change that.

MARCH 26, 2013 1:03 P.M.

Mark Priest wrote:

What all these analyst are missing is this...
2007 the smartphone market was 150M, enter Apple and the touchscreen. Very poor sales 2007, 2008, 2009...The smartphone market grew but BB also grew it's subscriber base having an inferior product...jump to 2012 and the Smartphone market is close to a Billion phones...Apple continued to gain most in the 850M increased market space (selling phones)...Samsung gained in this space as well...BB was never in the everyday user market but still managed to grow from 45M subscribers to 80M in that time frame...The market is now grown into it's size of 1 billion phones but that took 5 years to happen. Now the market is about replacement phones in the 1 billion phone space. BB now has a phone to compete and some would argue dominate in this space however it will not take as long to gain Market share as it did for Apple or Samsung because the market is now established at a billion smartphones...no one is going to use a cell phone anymore...

The reviews of BB10 phones (and they only released one phone of 7 so far) are extraordinarily positive (go on amazon and best buy and check for yourself)...The user experience is superior to Apple and Android...word of mouth when friends and relatives show others will sell the phone into that space (850 M Market BB was never in)...This phone will sell, it is a better user experience period! The difference this time is that the change won't happen over 4 years it will happen in one! BB will have a minimum 10 percent Global Market Share and could go as high as 30 but even with ten they are in the 8 - 12 billion in profits range and at 10 to 1 price to earnings ratio the value of the stock would be 150.00 to 225.00 a share...If you don't see the potential of a company that has a worldwide brand name, leading in security, the best Operating system 3 Billion in cash and growing, 80M subscribers and growing, and has managed to do this with an inferior product for 5 years and now has a superior one then I really don't know what to say other than WOW! Remember if they do catch on which I believe they already have and will continue to take portions of MS away from Apple and Samsung and actually get 20 percent MS the stock would be worth 300.00 to 500.00 if they manage to get back 30 percent then they are 500.00 to 1000.00 a share.

The market is huge and word of mouth is a big big player. Word of mouth about BB10 is 90 percent Positive from users and all the analysts in the world can't change that.

MARCH 26, 2013 1:04 P.M.

Anonymous wrote:

Re Amazon. The Z10 is not even in the top 100 sellers whereas the Curve w OS7 is selling at no. 19! One four star reviewer complained that his Z10 manual was in French and Spanish. An unsold redirect from Europe?

MARCH 26, 2013 1:15 P.M.

@ Mark Priest wrote:

90% is positive; word of mouth can't be wrong. To quote you. That's the point. They did not market for fear of being dissed and rejected. If you want to sell that way. I'm sure you'll similarly get even better user buyer satisfaction selling carrier pigeons. Statistically you could sell more carrier pigeons in China and India along with other emerging markets than Blackberrys. Apparently there are 300 million people in China you continue enjoy lying a lifestyle no different than the one they had 3000 years ago.

MARCH 26, 2013 1:18 P.M.

joe wrote:

@Anonymous. The current batch of the new BBRY phones are manufactured in Canada. If you remove the casing to put in the battery and extra memory you can see it. I'm sure all the parts come from Asia though. The plant is near their headquarters and r&d facilities. I know they have a big g facility in Mexico as well and have signed a deal with Chile.They cannot actually manufacture in mainline China yet because US and other west countries not only require secure software but proof of secure supply chain in manufacturing for secret level security.
I agree with Misek. I think BBRY is doing a good thing by going after the enterprise security market. It does't matter what phone the company uses, they want to manage it. They have a head start over Good and those other suppliers. Your company may not even have blackberrys but they might still buy BES to manage their iPhones and install BB s/w on them to separate corporate and personal stuff - BB make a buck no matter what.

MARCH 26, 2013 1:48 P.M.

@ Joe wrote:

Will they lose more than they gain. That's the question. Over the last twelve plus months there was a lot of hyperbole and platitudes. Any evidence of any of that coming true? How was buying over the weekend, yesterday and today? Cause for GS to retract from 30% success to 20?! Hmm. You forget. Isn't their real R+D in Germany now? And where's the PlayBook in this present picture? Still catching up?

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.